The big money cycle

Design changes to Dubai's Palm Jumeirah had complicated cost issues, says a project manager.

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A construction project can be worth billions in any currency, with an infinite number of incoming and outgoing flows of money to counterparties across the supply and investment chain.

The variables can be a matrix that are difficult to track: vehicles that need hiring, materials requiring purchase and sign-off on delivery, incoming payment from developers, sub contractors and employees needing payment – among a thousand other assets and liabilities.

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Controlling costs and maintaining transparency is a perennial issue for main contractors. Accounting and accountability needs to remain high as disputes claims increase across the region.

Steven Hunt, regional head for construction and engineering at law firm Al Tamimi told CW in May that the company is seeing more work in Abu Dhabi around dispute cases, for example, though not necessarily in conjunction with record keeping.

In the boom years in places like Dubai, where a lot of property was sold off-plan, some argue there were dangers that standards in cost control and keeping money traceable could have slipped.

Mike Aspinwall, managing director at RedSky IT, an accounting software provider, concurs. Further, he says the ability to keep track of expenditure will be one of the dividers between winners and losers in contracting.

“I think what’s happening is that the smarter companies know they have to be accurate with their costs and must tightly track variations when billing clients,” he says.

“This is a question of information, visibility, and low overheads.”

Some say there are systemic challenges to keeping track of payment flows. Fadi Elayache, general manager of Master Mason CPM, identifies five areas that present problems to the monitoring of cash flow either caused or affecting developers, contractors and consultants.

The first involves the evaluation of ongoing work. “A contractor might have the quantitative surveyor who estimates the work is 20% complete. The consultant might agree to avoid an argument – but is it really at 20%? If it’s not, there is a risk for the client.”